Investors Getting More Details Into SEC's Probe of JPMorgan (JPM) CIO Loss...
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Shares of J.P. Morgan Chase & Co. (NYSE: JPM) are indicated for a higher open Tuesday amid an overhanging potentially devastating federal investigation...which may actually result in nothing but a slap on the wrist.
A Reuters report this morning suggests the SEC's investigation into the bank's large CIO loss is focusing on how material the information was and whether it was disclosed in the proper reporting period.
JPMorgan shareholders will argue the news was indeed material: the stock dropped about 20 percent since the disclosure.
Typically, value-at-risk (VAR) models are changed following evaluation by committees composed of managers which monitor the risks and leaders choosing to take them. On its conference call, J.P. Morgan's Dimon didn't disclose who knew about the loss or when the model was changed.
Banks' VAR models are periodically expected to be disclosed to investors as they show the minimum an institution could lose should everything go under. Reuters noted the most important aspect of this metric isn't the number itself necessarily, but how it changes.
In April, J.P. Morgan said its VAR was $67 million in a single trading day, down from $69 million in December 2011. However, that calculation was based on a new model; the old model showed VAR had spiked to $129 million in a single trading day.
Despite the in-your-face obviousness of the VAR increase, experts said the SEC will seriously need to evaluate whether a reasonable investor sees the information as significant. One Duke University law professor said it all comes down to how aggressive the SEC wants to be with this case.
Given the SEC's efforts to take all the fun out of banking and equities markets, its unlikely they'll let this golden opportunity simply slip away.
J.P. Morgan stock is indicated for a higher open Tuesday.
A Reuters report this morning suggests the SEC's investigation into the bank's large CIO loss is focusing on how material the information was and whether it was disclosed in the proper reporting period.
JPMorgan shareholders will argue the news was indeed material: the stock dropped about 20 percent since the disclosure.
Typically, value-at-risk (VAR) models are changed following evaluation by committees composed of managers which monitor the risks and leaders choosing to take them. On its conference call, J.P. Morgan's Dimon didn't disclose who knew about the loss or when the model was changed.
Banks' VAR models are periodically expected to be disclosed to investors as they show the minimum an institution could lose should everything go under. Reuters noted the most important aspect of this metric isn't the number itself necessarily, but how it changes.
In April, J.P. Morgan said its VAR was $67 million in a single trading day, down from $69 million in December 2011. However, that calculation was based on a new model; the old model showed VAR had spiked to $129 million in a single trading day.
Despite the in-your-face obviousness of the VAR increase, experts said the SEC will seriously need to evaluate whether a reasonable investor sees the information as significant. One Duke University law professor said it all comes down to how aggressive the SEC wants to be with this case.
Given the SEC's efforts to take all the fun out of banking and equities markets, its unlikely they'll let this golden opportunity simply slip away.
J.P. Morgan stock is indicated for a higher open Tuesday.
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